Life is beginning to return to normal in China following the country’s bout with the coronavirus pandemic, but there are still signs the outbreak shifted how people in the world’s second-largest economy. Is the case with the U.S., plenty of Chinese staffers are working from home these days, a trend that could linger beyond the virus and one that could have long-term benefits for ETFs such as the KraneShares CSI China Internet Fund (NYSEARCA: KWEB).
KWEB tracks a portfolio of Chinese internet and internet-related companies. The portfolio includes Chinese internet companies that provide similar services like Google, Facebook, Twitter, eBay, and Amazon. Top holdings include Alibaba (NYSE: BABA), Tencent (OTC: TCEHY) and Baidu (NASDAQ: BIDU).
The coronavirus outbreak has had an overall deeply negative impact on markets and caused a historic spike in volatility,” according to KraneShares research. “While China’s internet sector has not been completely spared from the downturn, lifestyle changes associated with working from home have created opportunities in the internet sector.”
Many China tech companies have started out as social media firms that expanded through advertising, but they would also diverse into other areas like finance to help provide better diversification benefits, which have in turn helped greater investments.
Even against the COVID-19 backdrop, KWEB is showing some sturdiness this year, outperforming the MSCI China Index by about 300 basis points.
Working From Home Implications for KWEB
KWEB seeks to provide investment results that, before fees and expenses, generally correspond to the price and yield performance of a specific foreign equity securities benchmark. Its current benchmark is the CSI Overseas China Internet Index. Right now, KWEB is offering investors a surprisingly good value.
“KWEB’s price to earnings ratio is currently at an all-time low,” notes KraneShares. “This favorable valuation reflects both the strong revenue growth among the majority of KWEB’s holdings as well as the fact that sentiment, rather than fundamentals, continues to drive market performance in China’s internet sector.”
While quarantine policies in many lower risk Chinese regions are ending, there’s still an expected shift to work from home white-collar jobs, one that could KWEB over the long haul.
“As a result, many white-collar workers have been working exclusively on remote conferencing platforms,” notes KraneShares. “Life is slowly returning to normal in China, but outside of China physical offices are closing their doors and requiring employees to work from home. This is leading to a global increase in demand for remote work platforms and may provide a long-term catalyst for companies offering such services.”
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.